Lekoil Oil and Gas to acquire stake in Nigerian oilfield

Thursday, 22 May 2014 06:24

Lekoil Oil and Gas entered into a farm-in agreement with Green Energy International Limited effective 17 May 2014. (Image source: Eric Kounce/Wikimedia Commons)Lekoil Oil and Gas, a wholly-owned subsidiary of Lekoil Nigeria, will acquire a 40 per cent participating and economic interest in the Otakikpo Marginal Field from Green Energy International Limited

Green Energy International Limited held a 90 per cent of the economic interests in Lekoil Nigeria. The most recent 2C reserves estimates for Otakikpo are 36mn barrels of oil and 877mn cubic metres of gas. The company said that Otakikpo could be brought into production within 12 to 18 months of commencement of the work programme.

The field lies in a swamp location in oil mining lease 11 (OML 11) adjacent to the shoreline in the eastern part of the Niger Delta. OML 11 is jointly held by Nigerian National Petroleum Corporation, Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited.

The Otakikpo Marginal Field was awarded to Green Energy International Limited by the department of Petroleum Resources in 2011. The award also included a commitment to develop a small-scale gas utilisation project within 30 months of commencement of production.

Lekoil Oil and Gas entered into a farm-in agreement with Green Energy International Limited effective 17 May 2014. As part of the deal, Lekoil Oil and Gas is required to pay a signature bonus of US$7mn and subject to receipt of ministerial consent to the transfer of the participating interest, a production bonus of US$4mn.

In addition, Lekoil Oil and Gas is also required to fund an initial work programme agreed for re-entry of the existing wells and all costs until commencement of production, with a base case estimate of approximately US$67mn. Lekoil Oil and Gas’ expenditure on the initial work programme (IWP) shall be recovered preferentially from 88 per cent of production cash flow from oilfield, it said.

Lekan Akinyanmi, CEO of Lekoil, said, “Acquiring this interest in Otakikpo is a very attractive proposition, economically and operationally for Lekoil. It brings access to near term production — in line with our growth strategy, cash flow to fund activity on our other assets and upside potential to be proved up from 3D seismic and appraisal drilling. As the technical and financial partner, we will be able to showcase the technical ability within the company to bring assets into production.”